PRAGUE (Reuters) – Estonia is a Baltic Sea with 1.4 million people and has long weighed far more than it has in the technology sector, and now leads Central and Eastern Europe eager to fund Russia’s defense program in 2022 invasion of Ukraine.
It is not difficult to see the reason.
Although intensified security issues have promoted defense investment throughout Europe, Russia’s threats in Estonia and its Baltic neighbors, which spent decades under the Soviet era and Russian rule.
“Philosophically, Estonians will consider how to defend the country every day,” said Sten Tamkivi, a tech entrepreneur.
The early Skype executive told Reuters that the war prompted him and his London partners to use their 800 million euro investment platform plural – including Transferwise co-founder Taavet Hinrikus – the defense project and others supporting European sovereignty.
“We never thought of defending, but the tension on the eastern side of NATO is tactile,” Tamkivi said.
“We need to first address urgent national defense issues,” he said.
For example, in July last year, plural joins a €450 million C financing from German AI company Helsing, which uses data to enhance defense, intelligence and national security systems and has completed another defense agreement so far in 2025.
According to Dealroom.co, the share of European defense technology investment has risen from just 0.4% in 2024 to 1.7% of venture capital funds to nearly $1 billion.
Dealroom.co data shows that since Russia’s invasion of Ukraine in 2022, most of the funds have flowed to Western Europe, but the amount of funds in Central and Eastern Europe has tripled.
EU member Estonia plays an important role in its eastern side. Home to several tech unicorns, these startups hit $1 billion valuations, such as Skype, Bolt, Transferwise and others – it has minted dozens of wealthy tech executives with financial giants to support emerging ones defense company.
Its distance from Ukraine also allows for close cooperation with first-line units there to quickly test and adjust the technology, while privately funded groups in the Baltic countries are able to invest in purely military technology. In contrast, in Poland – the largest economy in the region and a major provider of military aid to Kiev – many venture capital firms have obtained public funds, which prevents them from directly funding military projects.
Still, funding to support defense projects has also appeared elsewhere in the region.
Vojta Rocek, a partner at Prague-based Presto Ventures, told Reuters that his company’s new 150 million euro fund is planned to invest in defense-focused startups.
Rocek said the team has reviewed more than 1,500 pitches since last spring and held calls from more than 600 teams and 60 shortlisted startups, resulting in three closed deals and three other deals completed. He said cybersecurity, quantum computing and AI represent major areas of focus.
Direct to the battlefield
Ragnar Sass, founder of Tallinn-based Darkstar, is a consortium of tech entrepreneurs and former military officers – telling Reuters Technologies that provide the best prospects for rapid deployment for Ukrainian battlefields such as drone thermal cameras and software systems, the most attractive .
For example, Darkstar recently invested in the drone data analytics company Foresight.
“In the past few months, investor sentiment has changed a lot,” said Sars, founder of the Estonian unicorn Pipedrive. “I haven’t seen a field develop at a pace, like I’m now See so fast.”
Venture capital interests throughout Eastern Europe promised to fill a funding gap in defense technology startups because banks are reluctant to worry about fouls on environmental, social and governance regulations, which also limit public funding.
“We have some doubts that we’ll see enough pitch decks in the defensive space, but the numbers are growing every month,” said Rocek of Presto Ventures. “Everyone is awake. People think the war will end quickly, But that’s not the case.”
The government in the region has also begun action. Radka Konderlova, the Defense Ministry’s official in charge of cooperation with industry, told Reuters that the Czechs have launched a plan to stimulate small businesses in the industry to stimulate their development.
In Estonia, the government established a 100 million euro fund for emerging defense technology last month, said Sille Pettai, CEO and fund manager of SmartCap.
The long-term goal is to attract global investors into a technology ecosystem, now what she calls the “patriotic capital” support of local wealthy tech entrepreneurs. She said the Estonian defense industry aims to reach €2 billion by 2030, up from the current €500 million, with a focus on destructive offensive defense technology.
“Defending a small country is expensive. We need to be smart and know where our strengths lie, so we are based on technology,” Petty told Reuters.
(Reported by Michael Kahn, edited by Tomasz Janowski)
